§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)
My right honourable friend the Secretary of State for Trade and Industry (Patricia Hewitt) has made the following Written Ministerial Statement.116WS
In 1998, the DTI entered into a PFI arrangement with the contractor, Laser (Teddington II) Limited (Laser), to build and subsequently maintain new science facilities at the National Physical Laboratory at Teddington.
During construction of the facilities, Laser encountered a number of technical difficulties that significantly delayed completion and increased costs to a level that threatened the project's viability. In July this year, Laser approached the department with a proposal that an agreed termination of the PFI project represented the best available option for resolving those difficulties.
DTI has now agreed with Laser and their lenders to the termination of the PFI project on the following basis. The department has made a termination payment of £75 million, based on the principles of the termination provisions of the project agreement. That means that full ownership of and responsibility for the new facilities, which have an insurance value of £120 million, have been transferred back to DTI.
Following the termination payment, net liabilities of £73 million on DTI's balance sheet will be extinguished, and the department will make significant cash savings from fees that would otherwise have been made in payment for the new facilities between now and 2023. This is an example of how the risk transfer principles of PFI arrangements can operate, with appropriate risks being ultimately transferred to the private sector to the benefit of the taxpayer.
DTI intends, wherever possible, to put to competitive tender the construction work needed to complete the facilities. DTI has also exercised its right to step into, in place of Laser, the support services management agreement made between Laser and Serco Limited for the provision by Serco of support services at the site, thereby ensuring uninterrupted provision of those services.
The DTI is confident that the arrangements will enable the outstanding work on the new facilities to be completed so that NPL can continue to deliver world-class science and vital support for innovation, consistent with value for money for the taxpayer.